St. John's: Solid economic footing

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Ever since 2005, St. John's population has been steadily growing thanks to the province's booming energy sector. With three major oil developments, Hibernia, Terra Nova and White Rose, the province now produces 35% of Canada's light sweet crude oil.

And though production at these oilfields is expected to wane in the coming years, those declines should be offset by the Hebron oil project when it comes on line in 2016 or 2017.

Because of this growing industry, Newfoundland and Labrador is again expected to lead the country in economic growth. TD Economics forecasts the province's gross domestic product (GDP) in 2011 will surge to 4.7%, with Saskatchewan following closely at 4.3% and Nova Scotiatrailing at 1.7%.

GROWING POPULATION

Newfoundland and Labrador suffered the effects of an under-performing fishing industry throughout the 1990s, causing many residents to leave the province in search of better employment opportunities. But in 2007, that 16-year-long trend was finally reversed. St. John's fared a little better than the rest of the province during this period, reporting positive net-migration figures since 1999. But the most notable improvements began in 2008 when the city welcomed 1,205 net-migrants, then 2,408 more in 2009 and another 2,294 in 2010.

Chris Janes, an analyst with the Canada Mortgage and Housing Corporation (CMHC), says the St. John's census metropolitan area (CMA), which now has a population of 190,000, has benefited from not only inter- and intra-provincial migration, but also immigration.

For instance, in 2010 St. John's welcomed 288 immigrants, 497 inter-provincial migrants and 1,509 Newfoundlanders, for a total of 2,294 net-migrants for the year.

Locals are moving from the rural areas of the province to St. John's to work in the energy sector, Janes says, along with new immigrants and many returning Newfoundlanders who left the province five to 10 years ago to work in the oilfields of Alberta and Texas. Migration will continue to remain in positive territory, according to CMHC, as the city prepares for 2,100 net-migrants in 2011 and 2,200 in 2012.

To get a more in depth look at the economics of this thriving city, pick up a copy of our September issue, on newsstands now.

Ever since 2005, St. John's population has been steadily growing thanks to the province's booming energy sector. With three major oil developments, Hibernia, Terra Nova and White Rose, the province now produces 35% of Canada's light sweet crude oil.

And though production at these oilfields is expected to wane in the coming years, those declines should be offset by the Hebron oil project when it comes on line in 2016 or 2017.

Because of this growing industry, Newfoundland and Labrador is again expected to lead the country in economic growth. TD Economics forecasts the province's gross domestic product (GDP) in 2011 will surge to 4.7%, with Saskatchewan following closely at 4.3% and Nova Scotiatrailing at 1.7%.

GROWING POPULATION

Newfoundland and Labrador suffered the effects of an under-performing fishing industry throughout the 1990s, causing many residents to leave the province in search of better employment opportunities. But in 2007, that 16-year-long trend was finally reversed. St. John's fared a little better than the rest of the province during this period, reporting positive net-migration figures since 1999. But the most notable improvements began in 2008 when the city welcomed 1,205 net-migrants, then 2,408 more in 2009 and another 2,294 in 2010.

Chris Janes, an analyst with the Canada Mortgage and Housing Corporation (CMHC), says the St. John's census metropolitan area (CMA), which now has a population of 190,000, has benefited from not only inter- and intra-provincial migration, but also immigration.

For instance, in 2010 St. John's welcomed 288 immigrants, 497 inter-provincial migrants and 1,509 Newfoundlanders, for a total of 2,294 net-migrants for the year.

Locals are moving from the rural areas of the province to St. John's to work in the energy sector, Janes says, along with new immigrants and many returning Newfoundlanders who left the province five to 10 years ago to work in the oilfields of Alberta and Texas. Migration will continue to remain in positive territory, according to CMHC, as the city prepares for 2,100 net-migrants in 2011 and 2,200 in 2012.

MORE JOBS

The steady flow of people into St. John's is a good indicator of its economic success, but so too is its unemployment rate, which hit a record low of 7.8% in 2010 - a major improvement from the city's historical average of 10%.

That has also sent wages up, Janes says, with the average weekly income in St. John's rising from $650 in 2006 to $867 in 2010.

"The three key indicators I look at to determine the health of the real estate market are employment, income and population growth. Those are the drivers of the housing market, and we do expect to see continued growth in all three of those areas, which will be driven primarily by the oil sector and the overall strength that that industry creates throughout the economy."

RENTAL MARKET

The continued economic success of St. John's is obviously good news for real estate investors. Vacancy rates fell below 1% in 2009 and only inched back up to 1.1% in 2010, leaving St. John's with one of the strongest markets in Canada.

The increasing demand in the city has sent rental rates up nicely, reaching $725 a month for an average two-bedroom apartment in 2010, up from $677 in 2009. CMHC forecasts the average will increase further in 2011 to $775, and to $825 in 2012.

NEW CONSTRUCTION Apartment-condominiums are still a small part of the real estate market, representing only 4% of the market for resale units and 5% for new units. But construction companies, confident in the city's growing economy, continue to invest in new developments, Janes says.

"Condos are a very small part of the market, but it is a growing sector right now. And I think the prosperity that we have experienced over the past few years here certainly has spurred a lot of the construction in the condo sector."

Apartment-condo starts dropped to 44 in 2010, down from 62 in 2009, while completions rose to 95 in 2010, up from 50 in 2009. With about 250 units under construction, Janes says he expects the market will continue to grow.

NEW VS. RESALE

Looking at the capital growth of both new and resale units, it's not really too hard to see what's the better buy. The average price of a resale apartment-condo rose to $241,540 to in 2010, up 19% from 2009 when the average price was $203,329.

The average price of a new apartment-condo, on the other hand, rose to $281,631 in 2010, up only 4% from 2009 when the average price was $270,222. But both were up in 2010 by 73% since 2006. For those who choose to purchase a resale unit, CMHC forecasts they can expect to see 4.7% price growth in 2011 and 2.1% in 2012.

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